Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Books and Records Rules and Update Obsolete NASD References in Its Rulebook, 15996-16003 [2021-06125]
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15996
Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91370; File No. SR–BX–
2021–006]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Books and Records Rules
and Update Obsolete NASD
References in Its Rulebook
March 19, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 8,
2021, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to update the
Exchange’s books and records
provisions; update obsolete references
to NASD rules in the Exchange’s
rulebook (‘‘Rulebook’’); and make other
related and cleanup changes.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Documentation of Changes in Account
Name or Designation).
1. Purpose
In 2012, The Nasdaq Stock Market’s
(‘‘Nasdaq’’) filed a proposal to mirror
the FINRA Books and Records filing.6
Nasdaq’s filing renumbered its then
Rule 3110 as Rule 3110A (which was
later relocated under Nasdaq General 9,
Section 30 7) and adopted the Nasdaq
Rule 4510A Series to parallel the
provisions in the FINRA rulebook, as
shown in the chart below:
In 2008, the Financial Industry
Regulatory Authority (FINRA) began a
process to harmonize and streamline its
rules by retiring, consolidating, and
relocating NASD rules into the FINRA
rulebook.3 Consistent with those
changes, the Exchange is proposing to
update the Exchange’s books and
records provisions; replace outdated
NASD references in its Rulebook; delete
unnecessary or duplicative rule text;
and consolidate certain Exchange rules.
Additionally, the Exchange proposes to
make some necessary cleanup changes
to improve the readability of its
Rulebook.
Generally, where appropriate, the
Exchange will replace the term
‘‘Association’’ and the ‘‘NASD’’
acronym with the acronym ‘‘FINRA.’’
Specifically, the Exchange will provide
cites to the updated FINRA rules and
current internal references as provided
in the relocated FINRA rules.
Additionally, the Exchange proposes
to delete throughout its Rulebook the
paragraphs that refer to the
consolidation of NASD rules into the
FINRA rulebook, since FINRA has
completed the relocation of the NASD
rules. Finally, the Exchange proposes to
update internal cross-references as
necessary.4
A. Books and Records Rules
3 See Information Notice, March 28, 2008
(Rulebook Consolidation Process) at https://
www.finra.org/sites/default/files/NoticeDocument/
p038121.pdf.
4 The Exchange will request an exemption from
the rule filing requirements of Section 19(b) of the
Exchange Act for those FINRA rules that it proposes
to incorporate by reference. The proposed rule
changes that are the subject of this filing will be
operative upon the approval of the Exchange’s
request for an exemption under Section 36 of the
Exchange Act from filing proposed rule changes.
5 See Securities Exchange Act Release No. 63784
(January 27, 2011), 76 FR 5850 (February 2, 2011)
(SR–FINRA–2010–052) (‘‘FINRA Books and Records
Filing’’).
Frm 00120
Fmt 4703
Sfmt 4703
Nasdaq books and records
Rule 4511A (Now Nasdaq
Gen. 9, Section 43).
Rule 4512A (Now Nasdaq
Gen. 9, Section 45).
Rule 4513A (Now Nasdaq
Gen. 9, Section 44).
Rule 4514A (Now Nasdaq
Gen. 9, Section 46).
Rule 4515A (Now Nasdaq
Gen. 9, Section 47).
FINRA books and
records
FINRA Rule 4511.
FINRA Rule 4512.
FINRA Rule 4513.
FINRA Rule 4514.
FINRA Rule 4515.
BX General 9, Section 30
Consistent with the 2012 Nasdaq
filing and the Nasdaq rules listed above,
the Exchange proposes to amend BX
General 9, Section 30 and provide that
Exchange members (and their associated
persons) shall comply with FINRA Rule
4511 as if such rule were part of the
Exchange’s rules. Moreover as detailed
below, the Exchange proposes to
incorporate by reference FINRA Rules
4511 through 4515 under its respective
General 9, Sections 43 through 47:
(1) General 9, Section 43
The FINRA Books and Records
Filing,5 amended prior NASD Rule 3110
(Books and Records) and adopted the
FINRA Rule 4510 Series (Books and
Records Requirements). This new Rule
4510 Series included FINRA Rules 4511
(General Requirements), 4512 (Customer
Account Information), 4513 (Records of
Written Customer Complaints), 4514
(Authorization Records for Negotiable
Instruments Drawn From a Customer’s
Account), and 4515 (Approval and
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Nasdaq Books and Records
Amendments
The Exchange proposes to incorporate
the FINRA rule by reference, indicating
that Exchange members and persons
associated with a member shall comply
with FINRA Rule 4511 as if such Rule
were part of the Exchange rules.
Additionally, the Exchange proposes
that references to FINRA rules shall be
construed as references to the rules of
the Exchange rules, and that references
to FINRA’s books and records shall be
construed as references to the
Exchange’s books and records.
(2) General 9, Section 44
The Exchange proposes to incorporate
FINRA Rule 4513 by reference,
indicating that Exchange members and
persons associated with a member shall
comply with FINRA Rule 4513 as if
6 See Securities Exchange Act Release No. 68123
(October 31, 2012), 77 FR 66658 (November 6, 2012)
(SR–NASDAQ–2012–123).
7 See Securities Exchange Act Release No. 87778
(December 17, 2019), 84 FR 70590 (December 23,
2019) (SR–NASDAQ–2019–098).
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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Notices
such Rule were part of the Exchange
rules.
(3) General 9, Section 45
With the elimination of rule text
within current General 9, Section 30,
the Exchange proposes to adopt a new
rule, similar to Nasdaq General 9,
Section 45, which provides:
(a) Exchange members and persons
associated with a member shall comply with
FINRA Rule 4512 as if such Rule were part
of the Exchange rules.
(b) For purposes of this Rule:
(1) References to Rule 3260 shall be
construed as references to General 9, Section
19;
(2) references to Rules 2070, 2090, and
4512 shall be construed as references to
General 9, Sections 29, 10, and this Rule,
respectively;
(3) references to ‘‘a prior FINRA rule’’ shall
be construed as references to ‘‘a FINRA or
Exchange rule in effect prior to the
effectiveness of FINRA Rule 4512’’;
(4) The Exchange and FINRA are parties to
the Regulatory Contract pursuant to which
FINRA has agreed to perform certain
functions on behalf of the Exchange.
Therefore, Exchange members are complying
with this Rule by complying with FINRA
Rule 4512 as written, including, for example,
providing information required by FINRA
staff. In addition, functions performed by
FINRA, FINRA departments, and FINRA staff
under this Rule are being performed by
FINRA on behalf of the Exchange.
(4) General 9, Section 46
The Exchange proposes to incorporate
FINRA Rule 4514 by reference,
indicating that Exchange members and
persons associated with a member shall
comply with FINRA Rule 4514 as if
such Rule were part of the Exchange
rules.
(5) General 9, Section 47
The Exchange proposes to incorporate
FINRA Rule 4515 by reference,
indicating that Exchange members and
persons associated with a member shall
comply with FINRA Rule 4515 as if
such Rule were part of the Exchange
rules. Furthermore, the Exchange
proposes that references to FINRA Rule
3260 shall be construed as references to
Exchange’s General 9, Section 19.
B. Global Changes
As previously indicated, the Exchange
also proposes to replace the terms
‘‘Association’’ and/or ‘‘NASD’’ with the
term ‘‘FINRA,’’ without making other
accompanying changes to the rules (this
will also include a few, necessary
grammatical changes, such as removing
where appropriate the word ‘‘the’’).
Accordingly, the Exchange will update
General 2, Section 5; General 9, Section
1(b); General 9, Section 3; General 9,
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Section 10; General 9, Section 21;
General 9, Section 33; and Rules 2830;
2843; 2848; 11210; IM–11710; 11860;
and 11870. The Exchange notes that it
will not update references to NASD
notices in its Rulebook. Specifically, the
notices referenced in General 9, Section
20(e) (‘‘NASD Notice to Members 97–
19’’) and Rule 4630(d) (‘‘NASD Notice to
Members 91–45’’) will remain
unchanged.
title. This change is made pursuant to
the relocation of Exchange Rules 0111,
0112, 0113, 0120, and 0121 to General
1 and Equity 1 in 2019.9
Additionally, the Exchange will
update the reference to the BX Rule
1200 Series with a reference to General
4 (‘‘Registration Requirements’’),10
which currently incorporates by
reference Nasdaq’s registration rules.
C. Specific NASD Rule Changes
The Exchange proposes the following
changes to capture the amendments and
relocation of rules in the FINRA
rulebook. Additionally, the crossreferences updates are intended to keep
the Exchange’s rules aligned with their
corresponding FINRA rules:
The Exchange proposes to update the
title of current Section 1(b), ‘‘Trading
Ahead of Customer Limit Order’’ with a
title consistent with Nasdaq and FINRA
rules: ‘‘Prohibition Against Trading
Ahead of Customer Orders.’’
Moreover, the Exchange proposes to
update the introductory paragraph in
Section 1(b), that currently points to
NASD Interpretive Material 2110–2 with
a reference to FINRA Rule 5320
(‘‘Prohibition Against Trading Ahead of
Customer Orders’’). In 2009, FINRA
proposed to integrate NASD IM–2110–2
and NASD Rule 2111 into FINRA Rule
5320, to govern members’ treatment of
customer orders and apply the new Rule
5320 to all equity securities uniformly,
and to extend the application of NASD
Rule 2111 to OTC equity securities.11 In
regard to this FINRA rule consolidation,
the Exchange proposes to merge the
contents of its Sections 1(b) and (h), as
some of their contents will be otherwise
duplicative.
Therefore, the Exchange proposes to
delete Section 1(b)(1), which currently
points to the term ‘‘NASD Rules’’ and
provides a cross-reference to NASD
Interpretive Material 2110–2(a). This is
because Section 1(b)’s opening
paragraph already requires members to
comply with FINRA Rule 5320 as if it
was an Exchange rule and FINRA Rule
5320 does not use the term ‘‘NASD
Rules.’’
Similarly, because current FINRA
Rule 5320 does not contain references to
NASD’s Board of Directors, the
Exchange proposes to delete the text
under current Section 1(b)(2) and
renumber the subsequent subsections.
Moreover, to be consistent with
FINRA Rule 5320, the Exchange
proposes to remove, update, and insert
new cross-references under renumbered
Section 1(b)(1). The Exchange will thus
delete the cross reference that currently
General 2, Section 5. Regulation of the
Exchange and Its Members
The Exchange proposes to update
General 2, Section 5 (‘‘Regulation of the
Exchange and Its Members’’) by splitting
its subsection (b) into two separate
subsections and, thus, follow the same
rule structure of equivalent General 2,
Section 5 in Nasdaq rulebook.
Additionally, as previously informed,
given that FINRA has already completed
the consolidation and relocation of the
NASD rules, the Exchange proposes to
delete current subsection (c).
General 2, Section 15. Business
Continuity Plans
The Exchange proposes to update the
NASD Rule 3510 reference in this rule
and replace it with a reference to FINRA
Rule 4370 (‘‘Business Continuity Plans
and Emergency Contact Information’’).
FINRA Rule 4370 was adopted to
include NASD Rules 3510 (‘‘Business
Continuity Plans’’) and NASD Rule 3520
(‘‘Emergency Contact Information’’)
without substantive changes to the rule
text.8
Additionally, the Exchange proposes
to include a new paragraph (b) that will
indicate that references in FINRA Rule
4370 to Rule 4517 shall be construed as
references to Exchange’s General 2,
Section 16.
General 3, Section 1. Membership,
Registration and Qualification
Requirements
The Exchange proposes to make a
cleanup change in General 3, Section 1.
Specifically, the Exchange proposes to
update the text in the rule’s
introductory text by replacing the
reference to BX Rule 0120 with a
reference to the General 1 and Equity 1
8 See Securities Exchange Act Release No. 60534
(August 19, 2009), 74 FR 44410 (August 28, 2009)
(SR–FINRA–2009–036).
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General 9, Section 1. General Standards
9 See Securities Exchange Act Release No. 87468
(November 5, 2019), 84 FR 61091 (November 12,
2019) (SR–BX–2019–039).
10 See Securities Exchange Act Release No. 85726
(April 26, 2019), 84 FR 18908 (May 2, 2019) (SR–
BX–2019–010).
11 See Securities Exchange Act Release No. 63895
(February 11, 2011), 76 FR 9386 (February 17, 2011)
(SR–FINRA–2009–090).
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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Notices
points to NASD Rules 2110 since no
equivalent rule is provided under
FINRA Rule 5320; relatedly, the
Exchange will delete the reference to
General 9, Section 1. The Exchange also
proposes to replace the references to
NASD Rules 2320 and 3110,
respectively, with references to FINRA
Rules 5310, and 4512 and provide the
corresponding references in the
Exchange rulebook. The Exchange
proposes also to insert a cross-reference
to FINRA Rule 7440 and the equivalent
Exchange Rule 7440A.
The Exchange proposes to delete the
text under renumbered Section 1(b)(3)
and insert clarifying text indicating that
FINRA Rule 5320.02(b) and the
reference to Rule 6420 therein shall be
disregarded. This is because the
Exchange does not list or trade over the
counter securities (‘‘OTC’’).
The Exchange proposes to update
renumbered Section 1(b)(4) since the
exemption referenced in it is now
located in FINRA Rule 5320,
Supplementary Material .03. Relatedly,
the Exchange will insert in renumbered
Section 1(b)(4) clarifying text indicating
that members will comply with the
rule’s reporting requirements.
The Exchange proposes to update
Section 1(c) by replacing the reference
to NASD Interpretive Material 2110–3
with a reference to FINRA Rule 5270
(‘‘Front Running of Block
Transactions’’), which FINRA adopted
to broaden the scope of the NASD rule
and provide further clarity into activity
that FINRA believes is inconsistent with
just and equitable principles of trade.12
The Exchange also proposes to update
Section 1(f) by replacing the reference to
NASD Interpretive Material 2110–6 with
a reference to FINRA Rule 2232
(‘‘Customer Confirmations’’). FINRA
Rule 2232 was adopted to streamline
and consolidate basic customer
confirmation requirements in NASD
Rule 2230, NASD IM–2110–6, and
Incorporated NYSE Rule 409(f).13
The Exchange proposes to update
Section 1(g) by replacing the reference
to NASD Interpretive Material 2110–7
with a reference to FINRA Rule 2140
(‘‘Interfering With the Transfer of
Customer Accounts in the Context of
Employment Disputes’’). FINRA Rule
2140 was adopted without any material
changes to the NASD rule text.14
12 See
Securities Exchange Act Release No. 67774
(September 4, 2012), 77 FR 55519 (September 10,
2012) (SR–FINRA–2012–025).
13 See Securities Exchange Act Release No. 63150
(October 21, 2010), 75 FR 66173 (October 27, 2010)
(SR–FINRA–2009–058).
14 See Securities Exchange Act Release No. 59495
(March 3, 2009), 74 FR 10632 (March 11, 2009) (SR–
FINRA–2008–052).
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Finally, following the deletion of
Section 1(h), the Exchange proposes to
re-letter current Section 1(i) (‘‘Use of
Manipulative, Deceptive or Other
Fraudulent Devices’’) as Section 1(h).
General 9, Section 3. Communications
With the Public and Section 4.
Institutional Sales Material and
Correspondence
In 2012, FINRA adopted Rule 2210
(‘‘Communications with the Public’’) to
encompass, among other provisions,
NASD Rules 2210 and 2211, and NASD
Interpretive Materials 2210–1 and 2210–
4.15 The Exchange proposes to
consolidate the text of General 9,
Sections 3 and 4 into current Section 3
and reserve current Section 4, as
explained below.
Current General 9, Section 3(a)
incorporates by reference NASD Rule
2210 (‘‘Communications with the
Public’’). The Exchange proposes to
update this reference with the name
‘‘FINRA.’’
The Exchange also proposes to delete
Section 3(b) which currently
incorporates by reference NASD IM–
2210–1 which, as explained above, was
merged into FINRA Rule 2210. Updating
current Section 3(b) to incorporate
FINRA Rule 2210 will make Section 3(b)
redundant. Therefore, Section 3(b) will
be deleted as it is no longer necessary.
Following the deletion of Section 3(b),
the Exchange will re-letter current
Section 3(c) as (b), without any changes
to the rule text.
The Exchange proposes to delete
General 9, Section 4 and relocate some
of its contents under current General 9,
Section 3. General 9, Section 4(a) will be
deleted because Section 3(a) already
incorporates the provisions from NASD
Rule 2211 which were merged into
current FINRA Rule 2210.
Furthermore, the Exchange believes
that the exception in current Section
4(a) concerning NASD Rule 2211(d)(3)
does not need to be added to General 9,
Section 3(a), because that provision is
no longer referenced in FINRA Rule
2210.
The Exchange also proposes to adopt
current Section 4(b)(1) as Section 3(c),
with a minor change. New Section 3(c)
will provide that references to FINRA
‘‘membership’’ will be construed as
references to membership with the
Exchange.
Finally, the Exchange proposes to
adopt part of the text in current Section
4(b)(2) as Section 3(d). New Section 3(d)
will omit references to FINRA Rule 2210
15 See Securities Exchange Act Release No. 66681
(March 29, 2012), 77 FR 20452 (April 4, 2012) (SR–
FINRA–2011–035).
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(as such incorporation is already
provided in Section 3(a)) and will state
that references to FINRA Rules 4512 16
and 3110 17 shall be read, respectively,
as references to General 9, Section 45
and Section 20.
General 9, Section 9. Fairness Opinions
The Exchange proposes to update the
NASD Rule 2290 reference in this rule
and replace it with a reference to FINRA
Rule 5150 (‘‘Fairness Opinions’’). The
aforementioned NASD rule was
relocated to FINRA Rule 5150 with no
changes to the rule text.18
General 9, Section 10.
Recommendations to Customers
(Suitability)
The Exchange proposes to update the
NASD Rule 2310 reference in this rule
and replace it with a reference to FINRA
Rule 2111 (‘‘Suitability’’). The FINRA
Suitability rule was adopted in 2010 to
include NASD Rule 2310
(Recommendations to Customers
(Suitability)) and its related
Interpretative Materials.19
As previously described, the
Exchange will delete the paragraphs that
refer to FINRA consolidating the NASD
rules into a new FINRA rulebook, since
such relocation has been completed.
Concerning the second paragraph in
Section 10(a), the Exchange notes that it
will also delete the cross-reference to
Rule 3110, since such reference was not
relocated when NASD Rule 2310 was
merged into FINRA Rule 2111.
The Exchange also proposes to delete
Section 10(b) since, as already
described, NASD Rule 2310’s
interpretive materials were merged into
FINRA Rule 2111, which would make
Section 10(b) duplicative.
Moreover, the Exchange proposes to
assign the letter (b) to the text that
begins with ‘‘For purposes of . . .’’ and
make the following changes:
The Exchange will insert a new
subsection (1) which will provide that
any references to Rules 2111 and 4512
in FINRA Rule 2111 shall be construed,
respectively, as references to Exchange’s
General 9, Section 10 and 45.
The Exchange will also renumber the
next paragraph as (2) and replace the
references to ‘‘Association’s Rules’’ and
‘‘Association Rules’’ with the term
‘‘FINRA rules’’.
16 See
supra note 5.
Securities Exchange Act Release No. 71179
(December 23, 2013), 79 FR 79542 (December 30,
2013) (SR–FINRA–2013–025).
18 See Securities Exchange Act Release No. 58643
(September 25, 2008), 73 FR 57174 (October 1,
2008) (SR–FINRA–2008–028).
19 See Securities Exchange Act Release No. 63325
(November 17, 2010), 75 FR 71479 (November 23,
2010) (SR–FINRA–2010–039).
17 See
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The Exchange will next delete the
paragraph that refers to NASD’s District
Business Conduct Committees and
Board of Governors, as such references
are not provided in the current FINRA
Suitability rule. Similarly, the Exchange
will delete the paragraph that references
the term ‘‘Association’’ since such term
is not in the current FINRA rule.
Furthermore, the Exchange will also
delete the reference to Rule 2840 as
such rule is not referenced in FINRA
Rule 2111.
The Exchange will insert a new
subsection (3) which will clarify that
references to Rule 2214 shall be
disregarded, and no comparable
Exchange Rule shall apply to activities
of Exchange Members in connection
with investment analysis tools.20
Finally, the Exchange proposes to
delete the rule text in current Section
10(c) since, as already explained, the
Interpretive Materials of NASD Rule
2310 were merged into the FINRA
Suitability rule. In its place, the
Exchange proposes to adopt the same
cross-reference found in Nasdaq’s
General 9, Section 10(c) to provide that
Exchange members will comply with
FINRA Rule 2090 (‘‘Know Your
Customer’’) as if such rule was part of
the Rules of the Exchange.
General 9, Section 12. Customer
Account Statements
The Exchange proposes to update the
NASD Rule 2340 reference in this rule
and replace it with a reference to FINRA
Rule 2231 (‘‘Customer Account
Statements’’). FINRA Rule 2231 was
adopted without any substantive
changes to the NASD rule text.21
Moreover, the Exchange proposes to
amend Section 12(b) to provide that
references in FINRA Rule 2231 to
FINRA Rule 2310 (‘‘Direct Participation
Programs’’) shall be construed as a
reference to the corresponding BX Rule
2310A. Additionally, the Exchange
proposes to replace the reference to
NASD Rule 3110 with FINRA Rule 4512
(‘‘Customer Account Information’’) and
insert its corresponding cross-reference
to General 9, Section 45. Finally, the
Exchange proposes to delete the word
‘‘Equity’’ (used twice in the subsection)
and re-arrange the rules in Section 12(b)
to match their corresponding references
in the Nasdaq rulebook.
20 The Exchange notes that a correction shall be
made in a future filing to current Nasdaq General
9, Section 10(b)(3), which currently points to NASD
IM–2210–6, which has been relocated and should
actually refer to FINRA Rule 2214.
21 See Securities Exchange Act Release No. 85589
(April 10, 2019), 84 FR 15646 (April 16, 2019) (SR–
FINRA–2019–009).
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General 9, Section 13. Margin
Disclosure Statement
General 9, Section 16. Charges for
Services Performed
The Exchange proposes to update the
NASD Rule 2341 reference in this rule
and replace it with a reference to FINRA
Rule 2264 (‘‘Margin Disclosure
Statement’’). FINRA Rule 2264 was
adopted with only minor changes to the
text of NASD Rule 2341, and those
changes were intended to clarify the
submission of disclosure statements.22
The Exchange also proposes to amend
Section 13(b) by updating the reference
to NASD Rule 3110 with FINRA Rule
4512 23 and insert its corresponding
cross-reference to General 9, Section 45.
The Exchange proposes to update the
NASD Rule 2430 reference in this rule
and replace it with a reference to FINRA
Rule 2122 (‘‘Charges for Services
Performed’’). FINRA Rule 2122 was
adopted without any substantive
changes to the NASD rule text.28
General 9, Section 14. Approval
Procedures for Day-Trading Accounts
The Exchange proposes to update the
second sentence in Section 14(a) that
currently refers to NASD Rule 2361 with
FINRA Rule 2270. FINRA Rule 2270
was adopted with minor changes to the
text of NASD Rule 2361.24 The
Exchange proposes to insert text
indicating that a reference to FINRA
Rule 2270 shall be construed as a
reference to General 9, Section 14.
The Exchange also proposes to amend
Section 14(a) by updating the reference
to NASD Rule 3110 with FINRA Rules
4511 and 4512 25 and their
corresponding references to General 9,
Sections 30 and 45 (as indicated in the
preceding paragraph, the Exchange is
cross-referencing General 9, Section 14
with FINRA Rule 2270, and thus crossreferencing this Section 14 with
FINRA’s Books and Records rules is
unnecessary). Finally, the Exchange will
insert text indicating that references to
FINRA Rules 4210 shall be construed as
references to General 9, Section 38.
Similarly, the Exchange proposes to
update the second paragraph in Section
14(b) that currently refers to NASD Rule
2360 with a reference to FINRA Rule
2130. FINRA Rule 2130 was adopted
with minor changes to the text of NASD
Rule 2360.26 The Exchange also
proposes to amend Section 14(b) by
updating the reference to NASD Rule
3110 with FINRA Rule 4512 27 and the
corresponding reference to General 9,
Section 30 with Section 45, because it
corresponds to FINRA Rule 4512.
22 See Securities Exchange Act Release No. 60697
(September 21, 2009), 74 FR 49051 (September 25,
2009) (SR–FINRA–2009–052).
23 See supra note 5.
24 See Securities Exchange Act Release No. 61059
(November 24, 2009), 74 FR 62847 (December 1,
2009) (SR–FINRA–2009–059).
25 See supra note 5.
26 See supra note 24.
27 See supra note 5.
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General 9, Section 17. Net Transactions
With Customers
The Exchange proposes to update the
NASD Rule 2441 reference in this rule
and replace it with a reference to FINRA
Rule 2124 (‘‘Net Transactions with
Customers’’). FINRA Rule 2124 was
adopted without any substantive
changes to the NASD rule text.29 The
Exchange also proposes to update the a
cross-reference to NASD Rule 3110 with
references to FINRA Rules 4511 and
4512, which have a corresponding
Exchange rule under General 9, Sections
30 and 45.
General 9, Section 19. Discretionary
Accounts
The Exchange proposes to letter the
first paragraph as subsection (a) and
update the NASD Rule 2510 reference in
this rule and replace it with a reference
to FINRA Rule 3260 (‘‘Discretionary
Accounts’’). FINRA Rule 3260 was
adopted without any substantive
changes to the NASD rule text.30
Moreover, the Exchange will letter the
last paragraph in Section 19 as
subsection (b) and update the crossreferences to NASD rules with their
respective equivalent FINRA rules.
Specifically, the Exchange will replace
the NASD Rule 3010 reference with
FINRA Rule 3110. Additionally, the
Exchange will replace the NASD Rule
3110 reference with FINRA Rule 4512.31
Finally, the Exchange proposes to
replace the reference to General 9,
Section 30 with Section 45, because it
corresponds to FINRA Rule 4512.
General 9, Section 21. Supervisory
Control System and Section 22. Annual
Certification of Compliance and
Supervisory Processes
The Exchange proposes to consolidate
Sections 21 and 22 into one rule,
Section 21 (‘‘Supervisory Control
System, Annual Certification of
Compliance and Supervisory
Processes’’), as explained below. First,
the Exchange proposes to update the
28 See Securities Exchange Act Release No. 73714
(December 2, 2014), 79 FR 72743 (December 8,
2014) (SR–FINRA–2014–049).
29 See supra note 8.
30 See supra note 21.
31 See supra note 5.
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NASD Rule 3012 reference in this rule
and replace it with a reference to FINRA
Rule 3120 (‘‘Supervisory Control
System’’). FINRA Rule 3120 retained the
former NASD rule’s testing and
verification requirements for the
member’s supervisory procedures and
provided requirements for members
reporting $200 million or more in gross
revenue.32
Second, the Exchange proposes to
adopt as new Section 21(c) (‘‘Annual
Certification of Compliance and
Supervisory Processes’’) the text in
current Section 22(c). Further, the
Exchange will update in the relocated
subsection the reference to NASD Rule
3013 and replace it with a reference to
FINRA Rule 3130 (‘‘Annual Certification
of Compliance and Supervisory
Processes’’). FINRA Rule 3130 was
adopted to streamline and combine the
requirements of NASD Rule 3013 and
IM–3013.33
Third, the Exchange proposes to
adopt the text under Section 22(c) that
begins with the words: ‘‘For purposes of
this Rule . . .’’ and letter them as new
Section 21(d). In Section (d)(2), as
previously explained, the Exchange will
update the reference to NASD Rule 3013
with FINRA Rule 3130, which shall be
read as a reference to Exchange’s
corresponding rule under General 9,
Section 21. Similarly, the Exchange
proposes to update the cross-reference
to NASD Rule 2110 with FINRA Rule
2010. In 2008, NASD Rule 2110 was
renumbered as FINRA Rule 2010 with
no changes to the rule text.34
Additionally, the Exchange will change
the General 9, Section 22 reference,
which will be reserved, with a reference
to Section 21. Moreover, the Exchange
proposes to change the reference to
General 9, Section 1 with Section 1(a),
because it corresponds to FINRA Rule
2010.
Finally, the Exchange will delete and
reserve current General 9, Section 22,
since its subsections will be duplicative
of subsections in Section 21 after the
proposed changes.
General 9, Section 23. Outside Business
Activities of an Associated Person
The Exchange proposes to update the
NASD Rule 3030 reference in this rule
and replace it with a reference to FINRA
Rule 3270 (‘‘Outside Business Activities
of Registered Persons’’). FINRA Rule
3270 was adopted to harmonize and
simplify the events that constitute an
32 See
supra note 17.
Securities Exchange Act Release No. 58661
(September 26, 2008), 73 FR 57395 (October 2,
2008) (SR–FINRA–2008–030).
34 See supra note 18.
33 See
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outside business activity, expanding
upon the obligations imposed in NASD
Rule 3030, by prohibiting any registered
person from doing business with
another person as a result of any
business activity outside the scope of
the relationship with his or her member
firm, unless prior written notice was
provided to the member.35
Moreover, the Exchange will update
the duplicative cross-reference to NASD
Rule 3030 in Section 23(b) (which
should have been a reference to NASD
Rule 3040) and replace it with a
reference to FINRA Rule 3280.36 The
Exchange proposes also to update the
reference to General 9, Section 23 with
Section 24 (‘‘Private Securities
Transactions of an Associated Person’’),
because it corresponds to FINRA Rule
3280.
General 9, Section 24. Private Securities
Transactions of an Associated Person
The Exchange proposes to update the
NASD Rule 3040 reference in this rule
and replace it with a reference to FINRA
Rule 3280 (‘‘Private Securities
Transactions of an Associated Person’’).
FINRA Rule 3280 was adopted without
any substantive changes to the NASD
rule text.37
The Exchange will also update the
duplicative cross-reference in Section
24(b)(1) to NASD Rule 3040 (which
should have been actually a reference to
NASD Rule 3050) with a reference to
FINRA Rule 3210.38 The Exchange
proposes also to update the reference to
General 9, Section 24 with Section 25
(‘‘Transactions for or by Associated
Persons’’), because it incorporates
FINRA Rule 3210.
Furthermore, the Exchange proposes
to correct a typo in the quoted text in
General 9, Section 24(b)(2). Specifically,
the Exchange will substitute the word
‘‘immediately’’ with ‘‘immediate.’’
The Exchange proposes also to
replace a reference to NASD Rule 2790
with FINRA Rule 5130.39 The definition
of ‘‘immediate family member,’’ crossreferenced in General 9, Section
35 See Securities Exchange Act Release No. 62762
(August 23, 2010), 75 FR 53362 (August 31, 2010)
(SR–FINRA–2009–042).
36 See Securities Exchange Act Release No. 75757
(August 25, 2015), 80 FR 52530 (August 31, 2015)
(SR–FINRA–2015–030).
37 Id. See also Securities Exchange Act Release
No. 80105 (February 24, 2017), 82 FR 12387 (March
2, 2017) (SR–FINRA–2017–004).
38 See Securities Exchange Act Release No. 77550
(April 7, 2016), 81 FR 21924 (April 13, 2016) (SR–
FINRA–2015–029).
39 See Securities Exchange Act Release No. 58421
(August 25, 2008), 73 FR 51032 (August 29, 2008)
(SR–FINRA–2008–025).
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24(b)(2), is currently located under
FINRA Rule 5130(i)(5).
General 9, Section 25. Transactions for
or by Associated Persons
The Exchange proposes to update the
NASD Rule 3050 reference in this rule
and replace it with a reference to FINRA
Rule 3210 (‘‘Accounts At Other BrokerDealers and Financial Institutions’’).
FINRA Rule 3210 was adopted to
consolidate NASD Rule 3050,
Incorporated NYSE Rules 407 and 407A,
and Incorporated NYSE Rule
Interpretations 407/01 and 407/02. The
rule was designed to streamline the
provisions of the NASD and
incorporated NYSE rules and to help
facilitate effective oversight of the
specified trading activities of associated
persons of member firms.40
General 9, Section 26. Influencing or
Rewarding Employees of Others
The Exchange proposes to update the
NASD Rule 3060 reference in this rule
and replace it with a reference to FINRA
Rule 3220 (‘‘Influencing or Rewarding
Employees of Others’’). FINRA Rule
3220 was adopted without any material
changes to the NASD rule text.41
General 9, Section 28. Disclosure to
Associated Persons When Signing Form
U4
The Exchange proposes to update the
NASD Rule 3080 reference in this rule
and replace it with a reference to FINRA
Rule 2263 (‘‘Arbitration Disclosure to
Associated Persons Signing or
Acknowledging Form U4’’). NASD Rule
3080 was transferred into FINRA Rule
2263 which was adopted to improve
and clarify the disclosure requirement
of Form U4.42
General 9, Section 31. Use of
Information Obtained in Fiduciary
Capacity
The Exchange proposes to update the
NASD Rule 3120 reference in this rule
and replace it with a reference to FINRA
Rule 2060 (‘‘Use of Information
Obtained in Fiduciary Capacity’’).
FINRA Rule 2060 was adopted without
any changes to the NASD rule text.43
40 See
supra note 38.
Securities Exchange Act Release No. 58660
(September 26, 2008), 73 FR 57393 (October 2,
2008) (SR–FINRA–2008–027).
42 See Securities Exchange Act Release No. 60348
(July 20, 2009), 74 FR 37077 (July 27, 2009) (SR–
FINRA–2009–019).
43 See Securities Exchange Act Release No. 61071
(November 30, 2009), 74 FR 64109 (December 7,
2009) (SR–FINRA–2009–067).
41 See
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General 9, Section 33. Reporting
Requirements for Clearing Firms
The Exchange proposes to update the
NASD Rule 3150 reference in this rule
and replace it with a reference to FINRA
Rule 4540 (‘‘Reporting Requirements for
Clearing Firms’’). FINRA Rule 4540 was
adopted without any substantive
changes to the NASD rule text.44
General 9, Section 34. Extensions of
Time Under Regulation T and SEC Rule
15c3–3
The Exchange proposes to update the
NASD Rule 3160 reference in this rule
and replace it with a reference to FINRA
Rule 4230 (‘‘Required Submissions for
Requests for Extensions of Time Under
Regulation T and SEA Rule 15c3–3’’).
FINRA Rule 4230 was adopted largely
based on the text of NASD Rule 3160,
with a clarification to the original rule
text regarding the reporting obligations
of clearing members.45
General 9, Section 38. Margin
Requirements
The Exchange proposes to update the
NASD Rule 2520 references in this rule
and replace it with references to FINRA
Rule 4210 (‘‘Margin Requirements’’). In
2010, NASD Rules 2520, 2521, 2522,
and IM–2522 were combined and
consolidated into a single rule intended
to improve the organization of margin
rules and improve their readability.46
General 9, Section 49. Payments
Involving Publications That Influence
the Market Price of a Security
The Exchange proposes to update the
NASD Rule 2711 reference in this rule
and replace it with a reference to FINRA
Rule 2241 (‘‘Research Analysts and
Research Reports’’). Specifically, the
research report’s definition referenced
in General 9, Section 49(b)(3) was
relocated to current FINRA Rule
2241(a)(11). That definition was
amended to exclude communications
concerning open-end registered
investment companies not listed or
traded on an exchange.47
Exchange Rule 2830. Investment
Company Securities
The Exchange proposes to update the
NASD Rule 2830 reference in this rule
and replace it with a reference to FINRA
Rule 2341 (‘‘Investment Company
Securities’’). FINRA Rule 2341 was
44 See
supra note 21.
Securities Exchange Act Release No. 62482
(July 12, 2010), 75 FR 41562 (July 16, 2010) (SR–
FINRA–2010–024).
46 Id.
47 See Securities Exchange Act Release No. 75471
(July 16, 2015), 80 FR 43482 (July 22, 2015) (SR–
FINRA–2014–047).
45 See
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adopted without any substantive
changes to the NASD rule text.48
Moreover, to be consistent with crossreference updates in current FINRA
Rule 2341, the Exchange will update the
cross-reference to NASD Rule 2820 with
FINRA Rule 2320. Additionally, the
Exchange will update Rule 2830(b)(3) by
replacing the NASD Rule 2420 reference
with FINRA Rule 2040 and update the
rule text to track the text of FINRA Rule
2040(a). Finally, the Exchange will
replace the NASD Rule 2230 reference
with FINRA Rule 2232.
Exchange Rule 2843. Account Approval
The Exchange proposes to update the
references to NASD Rules 2860(b)(16)
and 2843 in this rule and replace them
with references to FINRA Rules
2360(b)(16) (‘‘Opening of Accounts’’)
and 2352 (‘‘Account Approval’’). FINRA
Rule 2360(b)(16) was adopted with
minor changes to its rule text and
FINRA Rule 2352 was adopted without
any substantive changes to its rule
text.49
Exchange Rule 2844. Suitability
The Exchange proposes to update the
reference to NASD Rules 2860(b)(19)
and 2844 in this rule and replace them
with references to FINRA Rules
2360(b)(19) (‘‘Suitability’’) and 2353
(‘‘Suitability’’). FINRA Rules 2360(b)(19)
and 2353 were adopted without any
substantive changes to their respective
rule text.50
Exchange Rule 2845. Discretionary
Accounts
The Exchange proposes to update the
reference to NASD Rules 2860(b)(18)
and 2845 in this rule and replace them
with references to FINRA Rules
2360(b)(18) (‘‘Discretionary Accounts’’)
and 2354 (‘‘Discretionary Accounts’’).
FINRA Rules 2360(b)(18) and 2354 were
adopted without any substantive
changes to their respective rule text.51
Moreover, to be consistent with crossreference updates in current FINRA
Rule 2360(b)(18), the Exchange proposes
to update the cross-reference to NASD
Rules 2510 and 3110(c)(4), respectively,
with FINRA Rules 3260 and 4512(c).
Relatedly, the Exchange proposes to
update the references to Exchange Rules
2510 and 3110(c)(4), respectively, with
48 See Securities Exchange Act Release No. 78130
(June 22, 2016), 81 FR 42016 (June 28, 2016) (SR–
FINRA–2016–019).
49 See Securities Exchange Act Release No. 58932
(November 12, 2008), 73 FR 69696 (November 19,
2008) (SR–FINRA–2008–032).
50 Id.
51 Id.
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16001
a reference to General 9, Sections 19 and
45.52
Exchange Rule 2846. Supervision of
Accounts
The Exchange proposes to update the
reference to NASD Rules 2860(b)(20)
and 2846 in this rule and replace them
with references to FINRA Rules
2360(b)(20) (‘‘Supervision of Accounts’’)
and 2355 (‘‘Supervision of Accounts’’).
FINRA Rules 2360(b)(20) and 2355 were
adopted without any substantive
changes to their respective rule text.53
Moreover, to be consistent with crossreference updates in current FINRA
Rule 2360(b)(20), the Exchange proposes
to update the cross-reference to NASD
Rules 3010, 3012, and 3013,
respectively, with FINRA Rules 3110,
3120, and 3130. Relatedly, the Exchange
proposes to update the references to
Exchange Rules 3010, 3012, and 3013
with respective references to General 9,
Sections 20 and 21.54
Exchange Rule 2847. Customer
Complaints
The Exchange proposes to update the
reference to NASD Rules 2860(b)(17)(A)
and 2847 in this rule and replace them
with references to FINRA Rules
2360(b)(17)(A) and 2356. FINRA Rules
2360(b)(17)(A) and 2356 were adopted
without any substantive changes to their
respective rule text.55
Moreover, to be consistent with crossreference updates in current FINRA
Rule 2360(b)(17)(A), the Exchange
proposes to update the cross-reference
to NASD Rule 3110 with references to
FINRA Rules 2268 and the Rule 4510
Series. Relatedly, the Exchange
proposes to update the references to
Exchange Rule 3110 with a reference to
General 9, Section 30.56 Finally, the
Exchange proposes to add text
indicating that the reference to Rule
5340 shall be disregarded as such rule
does not apply to the Exchange, as the
Exchange does not pre-time stamp order
tickets in connection with block
positioning.
Exchange Rule 2848. Communications
With the Public and Customers
Concerning Index Warrants, Currency
Index Warrants, and Currency Warrants
The Exchange proposes to update the
reference to NASD Rule 2848 in this
rule and replace it with a reference to
FINRA Rule 2357 (‘‘Communications
with the Public and Customers
52 See
supra note 9.
supra note 49.
54 See supra note 9.
55 See supra note 49.
56 See supra note 9.
53 See
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Concerning Index Warrants, Currency
Index Warrants and Currency
Warrants’’). FINRA Rule 2357 was
adopted without any substantive
changes to the NASD rule text.57
Exchange Rule 2849. Maintenance of
Records
The Exchange proposes to update the
reference to NASD Rules 2860(b)(17)(B)
and 2849 in this rule and replace them
with references to FINRA Rules
2360(b)(17)(B) and 2358. FINRA Rules
2360(b)(17)(B) and 2358 were adopted
without any substantive changes to their
respective rule text.58
Exchange Rule 3360. Short-Interest
Reporting
In 2008, FINRA Rule 4560 was
adopted to include the short interest
reporting requirements of the
substantially similar NASD Rule 3360
and Incorporated NYSE Rules 421(1)
and 421.10 with non-substantive
changes to the NASD rule text.59 In
2010, FINRA made further amendments
to the rule that were intended to
eliminate the definition of ‘‘OTC Equity
Security’’ in FINRA Rule 4560 (ShortInterest Reporting) and to clarify that
the rule applied to all equity securities
except restricted equity securities.60
The Exchange proposes to update
Rule 3360(a) by replacing the NASD
Rule 3360 reference with FINRA Rule
4560 (‘‘Short-Interest Reporting’’). The
Exchange will not update Rule 3360 to
include the reference to ‘‘Restricted
Equity Securities’’ found in FINRA Rule
4560 since such securities are not listed
or traded in the Exchange; relatedly, the
Exchange will omit the reference to
FINRA Rule 6420 since a cross-reference
to the definition of Restricted Equity
Securities is not required. Further, the
Exchange will add the word ‘‘all’’ before
the word ‘‘securities’’ but, unlike the
FINRA rule, will not insert the word
‘‘equities’’ because the Exchange also
lists options securities. Finally, the
Exchange will remove a sentence
concerning the reporting obligations to
reflect changes also made in the FINRA
rule.61
The Exchange also proposes to amend
current Rule 3360(b) and (c) and adopt
the text of current FINRA Rule 4560(b)
and (c).
57 See
supra note 49.
id.
59 See Securities Exchange Act Release No. 58461
(September 4, 2008), 73 FR 52710 (September 10,
2008) (SR–FINRA–2008–033).
60 See Securities Exchange Act Release No. 61979
(April 23, 2010), 75 FR 23316 (May 3, 2010) (SR–
FINRA–2010–003).
61 See Securities Exchange Act Release No. 66872
(April 27, 2012), 77 FR 26340 (May 3, 2012) (SR–
FINRA–2012–001).
58 See
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Exchange Rule 4200. Definitions
The Exchange proposes to update the
NASD Rule 2710(b)(11) reference in this
rule and replace it with a reference to
FINRA Rule 5190 (‘‘Notification
Requirements for Offering
Participants’’). In 2008, NASD Rules
2710(b)(10) and (11) were relocated into
FINRA Rule 5190 to consolidate and
streamline all Regulation M-related
notice requirements.62
The Exchange also proposes to
replace in Rule 4200(a)(3) and (b) the
cross-reference to Exchange Rule 4623
(‘‘Alternative Trading Systems’’) with
Exchange Rule 4624. Consistent with
FINRA Rule 5190(e), an Exchange
member’s notification obligation, as
described in Rule 4200, is detailed
under Exchange Rule 4624 (‘‘Penalty
Bids and Syndicate Covering
Transactions’’).
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,63 in general, and furthers the
objectives of Section 6(b)(5) of the Act,64
in particular, in that it is designed to
promote just and equitable principles of
trade and to protect investors and the
public interest by bringing greater
transparency to its rules by updating the
references to the FINRA rules
previously described. The Exchange’s
proposal is consistent with the Act and
will protect investors and the public
interest by harmonizing its rules and
clarifying outdated references so that
Exchange members and the general
public can readily locate FINRA rules
that are incorporated by reference into
the Rulebook.
The amendment to the books and
records rules, reference and crossreference updates, re-lettering,
renumbering, deleting unnecessary or
duplicative text, consolidating certain
Exchange rules, and other minor
technical changes will update the
Exchange’s rules and bring greater
transparency to the Exchange’s
Rulebook. The Exchange believes its
proposal will benefit investors and the
general public by increasing the
transparency of its Rulebook.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
62 See Securities Exchange Act Release No. 58514
(September 11, 2008), 73 FR 54190 (September 18,
2008) (SR–FINRA–2008–039).
63 15 U.S.C. 78f(b).
64 15 U.S.C. 78f(b)(5).
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of the purposes of the Act. The
Exchange believes that the proposed
amendments do not impose an undue
burden on competition because the
amendments to update the references
and cross-references in its Rulebook are
intended to bring greater clarity to the
Exchange’s rules. The amendment to the
books and records rules, reference and
cross-reference updates, re-lettering,
renumbering, deleting unnecessary or
duplicative text, consolidating certain
Exchange rules, and other minor
technical changes will update the
Exchange’s rules bring greater
transparency to the Exchange’s
Rulebook.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 65 and Rule 19b–
4(f)(6) thereunder.66
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
65 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
66 17
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16003
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
and C below, of the most significant
aspects of such statements.
Electronic Comments
[Release No. 34–91373; File No. SR–FINRA–
2021–004]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2021–006 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2021–006. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BX–2021–006 and should
be submitted on or before April 15,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.67
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021–06125 Filed 3–24–21; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Pilot
Program Related to FINRA Rule 11892
(Clearly Erroneous Transactions in
Exchange-Listed Securities)
March 19, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 15,
2021, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to extend the
current pilot program related to FINRA
Rule 11892 (Clearly Erroneous
Transactions in Exchange-Listed
Securities) (‘‘Clearly Erroneous
Transaction Pilot’’ or ‘‘Pilot’’) until
October 20, 2021.
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
2 17
67 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:52 Mar 24, 2021
Jkt 253001
PO 00000
Frm 00127
Fmt 4703
Sfmt 4703
1. Purpose
FINRA is proposing a rule change to
extend the current pilot program related
to FINRA Rule 11892 governing clearly
erroneous transactions in exchangelisted securities until the close of
business on October 20, 2021. Extending
the Pilot would provide FINRA and the
national securities exchanges additional
time to consider a permanent proposal
for clearly erroneous transaction
reviews.
On September 10, 2010, the
Commission approved, on a pilot basis,
changes to FINRA Rule 11892 that,
among other things: (i) Provided for
uniform treatment of clearly
erroneous transaction reviews in multistock events involving twenty or more
securities; and (ii) reduced the ability of
FINRA to deviate from the objective
standards set forth in the rule.4 In 2013,
FINRA adopted a provision designed to
address the operation of the Plan to
Address Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS
(‘‘Plan’’).5 Finally, in 2014, FINRA
adopted two additional provisions
addressing (i) erroneous transactions
that occur over one or more trading days
that were based on the same
fundamentally incorrect or grossly
misinterpreted information resulting in
a severe valuation error; and (ii) a
disruption or malfunction in the
operation of the facilities of a selfregulatory organization or responsible
single plan processor in connection
with the transmittal or receipt of a
trading halt.6
On April 9, 2019, FINRA filed a
proposed rule change to untie the
effectiveness of the Clearly Erroneous
Transaction Pilot from the effectiveness
of the Plan, and to extend the Pilot’s
effectiveness to the close of business on
October 18, 2019.7 On October 18, 2019,
4 See Securities Exchange Act Release No. 62885
(September 10, 2010), 75 FR 56641 (September 16,
2010) (Order Approving File No. SR–FINRA–2010–
032).
5 See Securities Exchange Act Release No. 68808
(February 1, 2013), 78 FR 9083 (February 7, 2013)
(Notice of Filing and Immediate Effectiveness of
File No. SR–FINRA–2013–012).
6 See Securities Exchange Act Release No. 72434
(June 19, 2014), 79 FR 36110 (June 25, 2014) (Order
Approving File No. SR–FINRA–2014–021).
7 See Securities Exchange Act Release No. 85612
(April 11, 2019), 84 FR 16107 (April 17, 2019)
(Notice of Filing and Immediate Effectiveness of
File No. SR–FINRA–2019–011).
E:\FR\FM\25MRN1.SGM
25MRN1
]]>Agencies
[Federal Register Volume 86, Number 56 (Thursday, March 25, 2021)]
[Notices]
[Pages 15996-16003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06125]
[[Page 15996]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91370; File No. SR-BX-2021-006]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Exchange's Books and Records Rules and Update Obsolete NASD References
in Its Rulebook
March 19, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 8, 2021, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to update the Exchange's books and records
provisions; update obsolete references to NASD rules in the Exchange's
rulebook (``Rulebook''); and make other related and cleanup changes.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In 2008, the Financial Industry Regulatory Authority (FINRA) began
a process to harmonize and streamline its rules by retiring,
consolidating, and relocating NASD rules into the FINRA rulebook.\3\
Consistent with those changes, the Exchange is proposing to update the
Exchange's books and records provisions; replace outdated NASD
references in its Rulebook; delete unnecessary or duplicative rule
text; and consolidate certain Exchange rules. Additionally, the
Exchange proposes to make some necessary cleanup changes to improve the
readability of its Rulebook.
---------------------------------------------------------------------------
\3\ See Information Notice, March 28, 2008 (Rulebook
Consolidation Process) at https://www.finra.org/sites/default/files/NoticeDocument/p038121.pdf.
---------------------------------------------------------------------------
Generally, where appropriate, the Exchange will replace the term
``Association'' and the ``NASD'' acronym with the acronym ``FINRA.''
Specifically, the Exchange will provide cites to the updated FINRA
rules and current internal references as provided in the relocated
FINRA rules.
Additionally, the Exchange proposes to delete throughout its
Rulebook the paragraphs that refer to the consolidation of NASD rules
into the FINRA rulebook, since FINRA has completed the relocation of
the NASD rules. Finally, the Exchange proposes to update internal
cross-references as necessary.\4\
---------------------------------------------------------------------------
\4\ The Exchange will request an exemption from the rule filing
requirements of Section 19(b) of the Exchange Act for those FINRA
rules that it proposes to incorporate by reference. The proposed
rule changes that are the subject of this filing will be operative
upon the approval of the Exchange's request for an exemption under
Section 36 of the Exchange Act from filing proposed rule changes.
---------------------------------------------------------------------------
A. Books and Records Rules
The FINRA Books and Records Filing,\5\ amended prior NASD Rule 3110
(Books and Records) and adopted the FINRA Rule 4510 Series (Books and
Records Requirements). This new Rule 4510 Series included FINRA Rules
4511 (General Requirements), 4512 (Customer Account Information), 4513
(Records of Written Customer Complaints), 4514 (Authorization Records
for Negotiable Instruments Drawn From a Customer's Account), and 4515
(Approval and Documentation of Changes in Account Name or Designation).
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 63784 (January 27,
2011), 76 FR 5850 (February 2, 2011) (SR-FINRA-2010-052) (``FINRA
Books and Records Filing'').
---------------------------------------------------------------------------
Nasdaq Books and Records Amendments
In 2012, The Nasdaq Stock Market's (``Nasdaq'') filed a proposal to
mirror the FINRA Books and Records filing.\6\ Nasdaq's filing
renumbered its then Rule 3110 as Rule 3110A (which was later relocated
under Nasdaq General 9, Section 30 \7\) and adopted the Nasdaq Rule
4510A Series to parallel the provisions in the FINRA rulebook, as shown
in the chart below:
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 68123 (October 31,
2012), 77 FR 66658 (November 6, 2012) (SR-NASDAQ-2012-123).
\7\ See Securities Exchange Act Release No. 87778 (December 17,
2019), 84 FR 70590 (December 23, 2019) (SR-NASDAQ-2019-098).
------------------------------------------------------------------------
Nasdaq books and records FINRA books and records
------------------------------------------------------------------------
Rule 4511A (Now Nasdaq Gen. 9, Section 43) FINRA Rule 4511.
Rule 4512A (Now Nasdaq Gen. 9, Section 45) FINRA Rule 4512.
Rule 4513A (Now Nasdaq Gen. 9, Section 44) FINRA Rule 4513.
Rule 4514A (Now Nasdaq Gen. 9, Section 46) FINRA Rule 4514.
Rule 4515A (Now Nasdaq Gen. 9, Section 47) FINRA Rule 4515.
------------------------------------------------------------------------
BX General 9, Section 30
Consistent with the 2012 Nasdaq filing and the Nasdaq rules listed
above, the Exchange proposes to amend BX General 9, Section 30 and
provide that Exchange members (and their associated persons) shall
comply with FINRA Rule 4511 as if such rule were part of the Exchange's
rules. Moreover as detailed below, the Exchange proposes to incorporate
by reference FINRA Rules 4511 through 4515 under its respective General
9, Sections 43 through 47:
(1) General 9, Section 43
The Exchange proposes to incorporate the FINRA rule by reference,
indicating that Exchange members and persons associated with a member
shall comply with FINRA Rule 4511 as if such Rule were part of the
Exchange rules. Additionally, the Exchange proposes that references to
FINRA rules shall be construed as references to the rules of the
Exchange rules, and that references to FINRA's books and records shall
be construed as references to the Exchange's books and records.
(2) General 9, Section 44
The Exchange proposes to incorporate FINRA Rule 4513 by reference,
indicating that Exchange members and persons associated with a member
shall comply with FINRA Rule 4513 as if
[[Page 15997]]
such Rule were part of the Exchange rules.
(3) General 9, Section 45
With the elimination of rule text within current General 9, Section
30, the Exchange proposes to adopt a new rule, similar to Nasdaq
General 9, Section 45, which provides:
(a) Exchange members and persons associated with a member shall
comply with FINRA Rule 4512 as if such Rule were part of the
Exchange rules.
(b) For purposes of this Rule:
(1) References to Rule 3260 shall be construed as references to
General 9, Section 19;
(2) references to Rules 2070, 2090, and 4512 shall be construed
as references to General 9, Sections 29, 10, and this Rule,
respectively;
(3) references to ``a prior FINRA rule'' shall be construed as
references to ``a FINRA or Exchange rule in effect prior to the
effectiveness of FINRA Rule 4512'';
(4) The Exchange and FINRA are parties to the Regulatory
Contract pursuant to which FINRA has agreed to perform certain
functions on behalf of the Exchange. Therefore, Exchange members are
complying with this Rule by complying with FINRA Rule 4512 as
written, including, for example, providing information required by
FINRA staff. In addition, functions performed by FINRA, FINRA
departments, and FINRA staff under this Rule are being performed by
FINRA on behalf of the Exchange.
(4) General 9, Section 46
The Exchange proposes to incorporate FINRA Rule 4514 by reference,
indicating that Exchange members and persons associated with a member
shall comply with FINRA Rule 4514 as if such Rule were part of the
Exchange rules.
(5) General 9, Section 47
The Exchange proposes to incorporate FINRA Rule 4515 by reference,
indicating that Exchange members and persons associated with a member
shall comply with FINRA Rule 4515 as if such Rule were part of the
Exchange rules. Furthermore, the Exchange proposes that references to
FINRA Rule 3260 shall be construed as references to Exchange's General
9, Section 19.
B. Global Changes
As previously indicated, the Exchange also proposes to replace the
terms ``Association'' and/or ``NASD'' with the term ``FINRA,'' without
making other accompanying changes to the rules (this will also include
a few, necessary grammatical changes, such as removing where
appropriate the word ``the''). Accordingly, the Exchange will update
General 2, Section 5; General 9, Section 1(b); General 9, Section 3;
General 9, Section 10; General 9, Section 21; General 9, Section 33;
and Rules 2830; 2843; 2848; 11210; IM-11710; 11860; and 11870. The
Exchange notes that it will not update references to NASD notices in
its Rulebook. Specifically, the notices referenced in General 9,
Section 20(e) (``NASD Notice to Members 97-19'') and Rule 4630(d)
(``NASD Notice to Members 91-45'') will remain unchanged.
C. Specific NASD Rule Changes
The Exchange proposes the following changes to capture the
amendments and relocation of rules in the FINRA rulebook. Additionally,
the cross-references updates are intended to keep the Exchange's rules
aligned with their corresponding FINRA rules:
General 2, Section 5. Regulation of the Exchange and Its Members
The Exchange proposes to update General 2, Section 5 (``Regulation
of the Exchange and Its Members'') by splitting its subsection (b) into
two separate subsections and, thus, follow the same rule structure of
equivalent General 2, Section 5 in Nasdaq rulebook.
Additionally, as previously informed, given that FINRA has already
completed the consolidation and relocation of the NASD rules, the
Exchange proposes to delete current subsection (c).
General 2, Section 15. Business Continuity Plans
The Exchange proposes to update the NASD Rule 3510 reference in
this rule and replace it with a reference to FINRA Rule 4370
(``Business Continuity Plans and Emergency Contact Information'').
FINRA Rule 4370 was adopted to include NASD Rules 3510 (``Business
Continuity Plans'') and NASD Rule 3520 (``Emergency Contact
Information'') without substantive changes to the rule text.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 60534 (August 19,
2009), 74 FR 44410 (August 28, 2009) (SR-FINRA-2009-036).
---------------------------------------------------------------------------
Additionally, the Exchange proposes to include a new paragraph (b)
that will indicate that references in FINRA Rule 4370 to Rule 4517
shall be construed as references to Exchange's General 2, Section 16.
General 3, Section 1. Membership, Registration and Qualification
Requirements
The Exchange proposes to make a cleanup change in General 3,
Section 1. Specifically, the Exchange proposes to update the text in
the rule's introductory text by replacing the reference to BX Rule 0120
with a reference to the General 1 and Equity 1 title. This change is
made pursuant to the relocation of Exchange Rules 0111, 0112, 0113,
0120, and 0121 to General 1 and Equity 1 in 2019.\9\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 87468 (November 5,
2019), 84 FR 61091 (November 12, 2019) (SR-BX-2019-039).
---------------------------------------------------------------------------
Additionally, the Exchange will update the reference to the BX Rule
1200 Series with a reference to General 4 (``Registration
Requirements''),\10\ which currently incorporates by reference Nasdaq's
registration rules.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 85726 (April 26,
2019), 84 FR 18908 (May 2, 2019) (SR-BX-2019-010).
---------------------------------------------------------------------------
General 9, Section 1. General Standards
The Exchange proposes to update the title of current Section 1(b),
``Trading Ahead of Customer Limit Order'' with a title consistent with
Nasdaq and FINRA rules: ``Prohibition Against Trading Ahead of Customer
Orders.''
Moreover, the Exchange proposes to update the introductory
paragraph in Section 1(b), that currently points to NASD Interpretive
Material 2110-2 with a reference to FINRA Rule 5320 (``Prohibition
Against Trading Ahead of Customer Orders''). In 2009, FINRA proposed to
integrate NASD IM-2110-2 and NASD Rule 2111 into FINRA Rule 5320, to
govern members' treatment of customer orders and apply the new Rule
5320 to all equity securities uniformly, and to extend the application
of NASD Rule 2111 to OTC equity securities.\11\ In regard to this FINRA
rule consolidation, the Exchange proposes to merge the contents of its
Sections 1(b) and (h), as some of their contents will be otherwise
duplicative.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 63895 (February 11,
2011), 76 FR 9386 (February 17, 2011) (SR-FINRA-2009-090).
---------------------------------------------------------------------------
Therefore, the Exchange proposes to delete Section 1(b)(1), which
currently points to the term ``NASD Rules'' and provides a cross-
reference to NASD Interpretive Material 2110-2(a). This is because
Section 1(b)'s opening paragraph already requires members to comply
with FINRA Rule 5320 as if it was an Exchange rule and FINRA Rule 5320
does not use the term ``NASD Rules.''
Similarly, because current FINRA Rule 5320 does not contain
references to NASD's Board of Directors, the Exchange proposes to
delete the text under current Section 1(b)(2) and renumber the
subsequent subsections.
Moreover, to be consistent with FINRA Rule 5320, the Exchange
proposes to remove, update, and insert new cross-references under
renumbered Section 1(b)(1). The Exchange will thus delete the cross
reference that currently
[[Page 15998]]
points to NASD Rules 2110 since no equivalent rule is provided under
FINRA Rule 5320; relatedly, the Exchange will delete the reference to
General 9, Section 1. The Exchange also proposes to replace the
references to NASD Rules 2320 and 3110, respectively, with references
to FINRA Rules 5310, and 4512 and provide the corresponding references
in the Exchange rulebook. The Exchange proposes also to insert a cross-
reference to FINRA Rule 7440 and the equivalent Exchange Rule 7440A.
The Exchange proposes to delete the text under renumbered Section
1(b)(3) and insert clarifying text indicating that FINRA Rule
5320.02(b) and the reference to Rule 6420 therein shall be disregarded.
This is because the Exchange does not list or trade over the counter
securities (``OTC'').
The Exchange proposes to update renumbered Section 1(b)(4) since
the exemption referenced in it is now located in FINRA Rule 5320,
Supplementary Material .03. Relatedly, the Exchange will insert in
renumbered Section 1(b)(4) clarifying text indicating that members will
comply with the rule's reporting requirements.
The Exchange proposes to update Section 1(c) by replacing the
reference to NASD Interpretive Material 2110-3 with a reference to
FINRA Rule 5270 (``Front Running of Block Transactions''), which FINRA
adopted to broaden the scope of the NASD rule and provide further
clarity into activity that FINRA believes is inconsistent with just and
equitable principles of trade.\12\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 67774 (September 4,
2012), 77 FR 55519 (September 10, 2012) (SR-FINRA-2012-025).
---------------------------------------------------------------------------
The Exchange also proposes to update Section 1(f) by replacing the
reference to NASD Interpretive Material 2110-6 with a reference to
FINRA Rule 2232 (``Customer Confirmations''). FINRA Rule 2232 was
adopted to streamline and consolidate basic customer confirmation
requirements in NASD Rule 2230, NASD IM-2110-6, and Incorporated NYSE
Rule 409(f).\13\
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 63150 (October 21,
2010), 75 FR 66173 (October 27, 2010) (SR-FINRA-2009-058).
---------------------------------------------------------------------------
The Exchange proposes to update Section 1(g) by replacing the
reference to NASD Interpretive Material 2110-7 with a reference to
FINRA Rule 2140 (``Interfering With the Transfer of Customer Accounts
in the Context of Employment Disputes''). FINRA Rule 2140 was adopted
without any material changes to the NASD rule text.\14\
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 59495 (March 3,
2009), 74 FR 10632 (March 11, 2009) (SR-FINRA-2008-052).
---------------------------------------------------------------------------
Finally, following the deletion of Section 1(h), the Exchange
proposes to re-letter current Section 1(i) (``Use of Manipulative,
Deceptive or Other Fraudulent Devices'') as Section 1(h).
General 9, Section 3. Communications With the Public and Section 4.
Institutional Sales Material and Correspondence
In 2012, FINRA adopted Rule 2210 (``Communications with the
Public'') to encompass, among other provisions, NASD Rules 2210 and
2211, and NASD Interpretive Materials 2210-1 and 2210-4.\15\ The
Exchange proposes to consolidate the text of General 9, Sections 3 and
4 into current Section 3 and reserve current Section 4, as explained
below.
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 66681 (March 29,
2012), 77 FR 20452 (April 4, 2012) (SR-FINRA-2011-035).
---------------------------------------------------------------------------
Current General 9, Section 3(a) incorporates by reference NASD Rule
2210 (``Communications with the Public''). The Exchange proposes to
update this reference with the name ``FINRA.''
The Exchange also proposes to delete Section 3(b) which currently
incorporates by reference NASD IM-2210-1 which, as explained above, was
merged into FINRA Rule 2210. Updating current Section 3(b) to
incorporate FINRA Rule 2210 will make Section 3(b) redundant.
Therefore, Section 3(b) will be deleted as it is no longer necessary.
Following the deletion of Section 3(b), the Exchange will re-letter
current Section 3(c) as (b), without any changes to the rule text.
The Exchange proposes to delete General 9, Section 4 and relocate
some of its contents under current General 9, Section 3. General 9,
Section 4(a) will be deleted because Section 3(a) already incorporates
the provisions from NASD Rule 2211 which were merged into current FINRA
Rule 2210.
Furthermore, the Exchange believes that the exception in current
Section 4(a) concerning NASD Rule 2211(d)(3) does not need to be added
to General 9, Section 3(a), because that provision is no longer
referenced in FINRA Rule 2210.
The Exchange also proposes to adopt current Section 4(b)(1) as
Section 3(c), with a minor change. New Section 3(c) will provide that
references to FINRA ``membership'' will be construed as references to
membership with the Exchange.
Finally, the Exchange proposes to adopt part of the text in current
Section 4(b)(2) as Section 3(d). New Section 3(d) will omit references
to FINRA Rule 2210 (as such incorporation is already provided in
Section 3(a)) and will state that references to FINRA Rules 4512 \16\
and 3110 \17\ shall be read, respectively, as references to General 9,
Section 45 and Section 20.
---------------------------------------------------------------------------
\16\ See supra note 5.
\17\ See Securities Exchange Act Release No. 71179 (December 23,
2013), 79 FR 79542 (December 30, 2013) (SR-FINRA-2013-025).
---------------------------------------------------------------------------
General 9, Section 9. Fairness Opinions
The Exchange proposes to update the NASD Rule 2290 reference in
this rule and replace it with a reference to FINRA Rule 5150
(``Fairness Opinions''). The aforementioned NASD rule was relocated to
FINRA Rule 5150 with no changes to the rule text.\18\
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release No. 58643 (September
25, 2008), 73 FR 57174 (October 1, 2008) (SR-FINRA-2008-028).
---------------------------------------------------------------------------
General 9, Section 10. Recommendations to Customers (Suitability)
The Exchange proposes to update the NASD Rule 2310 reference in
this rule and replace it with a reference to FINRA Rule 2111
(``Suitability''). The FINRA Suitability rule was adopted in 2010 to
include NASD Rule 2310 (Recommendations to Customers (Suitability)) and
its related Interpretative Materials.\19\
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 63325 (November 17,
2010), 75 FR 71479 (November 23, 2010) (SR-FINRA-2010-039).
---------------------------------------------------------------------------
As previously described, the Exchange will delete the paragraphs
that refer to FINRA consolidating the NASD rules into a new FINRA
rulebook, since such relocation has been completed. Concerning the
second paragraph in Section 10(a), the Exchange notes that it will also
delete the cross-reference to Rule 3110, since such reference was not
relocated when NASD Rule 2310 was merged into FINRA Rule 2111.
The Exchange also proposes to delete Section 10(b) since, as
already described, NASD Rule 2310's interpretive materials were merged
into FINRA Rule 2111, which would make Section 10(b) duplicative.
Moreover, the Exchange proposes to assign the letter (b) to the
text that begins with ``For purposes of . . .'' and make the following
changes:
The Exchange will insert a new subsection (1) which will provide
that any references to Rules 2111 and 4512 in FINRA Rule 2111 shall be
construed, respectively, as references to Exchange's General 9, Section
10 and 45.
The Exchange will also renumber the next paragraph as (2) and
replace the references to ``Association's Rules'' and ``Association
Rules'' with the term ``FINRA rules''.
[[Page 15999]]
The Exchange will next delete the paragraph that refers to NASD's
District Business Conduct Committees and Board of Governors, as such
references are not provided in the current FINRA Suitability rule.
Similarly, the Exchange will delete the paragraph that references the
term ``Association'' since such term is not in the current FINRA rule.
Furthermore, the Exchange will also delete the reference to Rule 2840
as such rule is not referenced in FINRA Rule 2111.
The Exchange will insert a new subsection (3) which will clarify
that references to Rule 2214 shall be disregarded, and no comparable
Exchange Rule shall apply to activities of Exchange Members in
connection with investment analysis tools.\20\
---------------------------------------------------------------------------
\20\ The Exchange notes that a correction shall be made in a
future filing to current Nasdaq General 9, Section 10(b)(3), which
currently points to NASD IM-2210-6, which has been relocated and
should actually refer to FINRA Rule 2214.
---------------------------------------------------------------------------
Finally, the Exchange proposes to delete the rule text in current
Section 10(c) since, as already explained, the Interpretive Materials
of NASD Rule 2310 were merged into the FINRA Suitability rule. In its
place, the Exchange proposes to adopt the same cross-reference found in
Nasdaq's General 9, Section 10(c) to provide that Exchange members will
comply with FINRA Rule 2090 (``Know Your Customer'') as if such rule
was part of the Rules of the Exchange.
General 9, Section 12. Customer Account Statements
The Exchange proposes to update the NASD Rule 2340 reference in
this rule and replace it with a reference to FINRA Rule 2231
(``Customer Account Statements''). FINRA Rule 2231 was adopted without
any substantive changes to the NASD rule text.\21\
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release No. 85589 (April 10,
2019), 84 FR 15646 (April 16, 2019) (SR-FINRA-2019-009).
---------------------------------------------------------------------------
Moreover, the Exchange proposes to amend Section 12(b) to provide
that references in FINRA Rule 2231 to FINRA Rule 2310 (``Direct
Participation Programs'') shall be construed as a reference to the
corresponding BX Rule 2310A. Additionally, the Exchange proposes to
replace the reference to NASD Rule 3110 with FINRA Rule 4512
(``Customer Account Information'') and insert its corresponding cross-
reference to General 9, Section 45. Finally, the Exchange proposes to
delete the word ``Equity'' (used twice in the subsection) and re-
arrange the rules in Section 12(b) to match their corresponding
references in the Nasdaq rulebook.
General 9, Section 13. Margin Disclosure Statement
The Exchange proposes to update the NASD Rule 2341 reference in
this rule and replace it with a reference to FINRA Rule 2264 (``Margin
Disclosure Statement''). FINRA Rule 2264 was adopted with only minor
changes to the text of NASD Rule 2341, and those changes were intended
to clarify the submission of disclosure statements.\22\
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 60697 (September
21, 2009), 74 FR 49051 (September 25, 2009) (SR-FINRA-2009-052).
---------------------------------------------------------------------------
The Exchange also proposes to amend Section 13(b) by updating the
reference to NASD Rule 3110 with FINRA Rule 4512 \23\ and insert its
corresponding cross-reference to General 9, Section 45.
---------------------------------------------------------------------------
\23\ See supra note 5.
---------------------------------------------------------------------------
General 9, Section 14. Approval Procedures for Day-Trading Accounts
The Exchange proposes to update the second sentence in Section
14(a) that currently refers to NASD Rule 2361 with FINRA Rule 2270.
FINRA Rule 2270 was adopted with minor changes to the text of NASD Rule
2361.\24\ The Exchange proposes to insert text indicating that a
reference to FINRA Rule 2270 shall be construed as a reference to
General 9, Section 14.
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 61059 (November 24,
2009), 74 FR 62847 (December 1, 2009) (SR-FINRA-2009-059).
---------------------------------------------------------------------------
The Exchange also proposes to amend Section 14(a) by updating the
reference to NASD Rule 3110 with FINRA Rules 4511 and 4512 \25\ and
their corresponding references to General 9, Sections 30 and 45 (as
indicated in the preceding paragraph, the Exchange is cross-referencing
General 9, Section 14 with FINRA Rule 2270, and thus cross-referencing
this Section 14 with FINRA's Books and Records rules is unnecessary).
Finally, the Exchange will insert text indicating that references to
FINRA Rules 4210 shall be construed as references to General 9, Section
38.
---------------------------------------------------------------------------
\25\ See supra note 5.
---------------------------------------------------------------------------
Similarly, the Exchange proposes to update the second paragraph in
Section 14(b) that currently refers to NASD Rule 2360 with a reference
to FINRA Rule 2130. FINRA Rule 2130 was adopted with minor changes to
the text of NASD Rule 2360.\26\ The Exchange also proposes to amend
Section 14(b) by updating the reference to NASD Rule 3110 with FINRA
Rule 4512 \27\ and the corresponding reference to General 9, Section 30
with Section 45, because it corresponds to FINRA Rule 4512.
---------------------------------------------------------------------------
\26\ See supra note 24.
\27\ See supra note 5.
---------------------------------------------------------------------------
General 9, Section 16. Charges for Services Performed
The Exchange proposes to update the NASD Rule 2430 reference in
this rule and replace it with a reference to FINRA Rule 2122 (``Charges
for Services Performed''). FINRA Rule 2122 was adopted without any
substantive changes to the NASD rule text.\28\
---------------------------------------------------------------------------
\28\ See Securities Exchange Act Release No. 73714 (December 2,
2014), 79 FR 72743 (December 8, 2014) (SR-FINRA-2014-049).
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General 9, Section 17. Net Transactions With Customers
The Exchange proposes to update the NASD Rule 2441 reference in
this rule and replace it with a reference to FINRA Rule 2124 (``Net
Transactions with Customers''). FINRA Rule 2124 was adopted without any
substantive changes to the NASD rule text.\29\ The Exchange also
proposes to update the a cross-reference to NASD Rule 3110 with
references to FINRA Rules 4511 and 4512, which have a corresponding
Exchange rule under General 9, Sections 30 and 45.
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\29\ See supra note 8.
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General 9, Section 19. Discretionary Accounts
The Exchange proposes to letter the first paragraph as subsection
(a) and update the NASD Rule 2510 reference in this rule and replace it
with a reference to FINRA Rule 3260 (``Discretionary Accounts''). FINRA
Rule 3260 was adopted without any substantive changes to the NASD rule
text.\30\
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\30\ See supra note 21.
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Moreover, the Exchange will letter the last paragraph in Section 19
as subsection (b) and update the cross-references to NASD rules with
their respective equivalent FINRA rules. Specifically, the Exchange
will replace the NASD Rule 3010 reference with FINRA Rule 3110.
Additionally, the Exchange will replace the NASD Rule 3110 reference
with FINRA Rule 4512.\31\ Finally, the Exchange proposes to replace the
reference to General 9, Section 30 with Section 45, because it
corresponds to FINRA Rule 4512.
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\31\ See supra note 5.
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General 9, Section 21. Supervisory Control System and Section 22.
Annual Certification of Compliance and Supervisory Processes
The Exchange proposes to consolidate Sections 21 and 22 into one
rule, Section 21 (``Supervisory Control System, Annual Certification of
Compliance and Supervisory Processes''), as explained below. First, the
Exchange proposes to update the
[[Page 16000]]
NASD Rule 3012 reference in this rule and replace it with a reference
to FINRA Rule 3120 (``Supervisory Control System''). FINRA Rule 3120
retained the former NASD rule's testing and verification requirements
for the member's supervisory procedures and provided requirements for
members reporting $200 million or more in gross revenue.\32\
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\32\ See supra note 17.
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Second, the Exchange proposes to adopt as new Section 21(c)
(``Annual Certification of Compliance and Supervisory Processes'') the
text in current Section 22(c). Further, the Exchange will update in the
relocated subsection the reference to NASD Rule 3013 and replace it
with a reference to FINRA Rule 3130 (``Annual Certification of
Compliance and Supervisory Processes''). FINRA Rule 3130 was adopted to
streamline and combine the requirements of NASD Rule 3013 and IM-
3013.\33\
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\33\ See Securities Exchange Act Release No. 58661 (September
26, 2008), 73 FR 57395 (October 2, 2008) (SR-FINRA-2008-030).
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Third, the Exchange proposes to adopt the text under Section 22(c)
that begins with the words: ``For purposes of this Rule . . .'' and
letter them as new Section 21(d). In Section (d)(2), as previously
explained, the Exchange will update the reference to NASD Rule 3013
with FINRA Rule 3130, which shall be read as a reference to Exchange's
corresponding rule under General 9, Section 21. Similarly, the Exchange
proposes to update the cross-reference to NASD Rule 2110 with FINRA
Rule 2010. In 2008, NASD Rule 2110 was renumbered as FINRA Rule 2010
with no changes to the rule text.\34\ Additionally, the Exchange will
change the General 9, Section 22 reference, which will be reserved,
with a reference to Section 21. Moreover, the Exchange proposes to
change the reference to General 9, Section 1 with Section 1(a), because
it corresponds to FINRA Rule 2010.
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\34\ See supra note 18.
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Finally, the Exchange will delete and reserve current General 9,
Section 22, since its subsections will be duplicative of subsections in
Section 21 after the proposed changes.
General 9, Section 23. Outside Business Activities of an Associated
Person
The Exchange proposes to update the NASD Rule 3030 reference in
this rule and replace it with a reference to FINRA Rule 3270 (``Outside
Business Activities of Registered Persons''). FINRA Rule 3270 was
adopted to harmonize and simplify the events that constitute an outside
business activity, expanding upon the obligations imposed in NASD Rule
3030, by prohibiting any registered person from doing business with
another person as a result of any business activity outside the scope
of the relationship with his or her member firm, unless prior written
notice was provided to the member.\35\
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\35\ See Securities Exchange Act Release No. 62762 (August 23,
2010), 75 FR 53362 (August 31, 2010) (SR-FINRA-2009-042).
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Moreover, the Exchange will update the duplicative cross-reference
to NASD Rule 3030 in Section 23(b) (which should have been a reference
to NASD Rule 3040) and replace it with a reference to FINRA Rule
3280.\36\ The Exchange proposes also to update the reference to General
9, Section 23 with Section 24 (``Private Securities Transactions of an
Associated Person''), because it corresponds to FINRA Rule 3280.
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\36\ See Securities Exchange Act Release No. 75757 (August 25,
2015), 80 FR 52530 (August 31, 2015) (SR-FINRA-2015-030).
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General 9, Section 24. Private Securities Transactions of an Associated
Person
The Exchange proposes to update the NASD Rule 3040 reference in
this rule and replace it with a reference to FINRA Rule 3280 (``Private
Securities Transactions of an Associated Person''). FINRA Rule 3280 was
adopted without any substantive changes to the NASD rule text.\37\
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\37\ Id. See also Securities Exchange Act Release No. 80105
(February 24, 2017), 82 FR 12387 (March 2, 2017) (SR-FINRA-2017-
004).
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The Exchange will also update the duplicative cross-reference in
Section 24(b)(1) to NASD Rule 3040 (which should have been actually a
reference to NASD Rule 3050) with a reference to FINRA Rule 3210.\38\
The Exchange proposes also to update the reference to General 9,
Section 24 with Section 25 (``Transactions for or by Associated
Persons''), because it incorporates FINRA Rule 3210.
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\38\ See Securities Exchange Act Release No. 77550 (April 7,
2016), 81 FR 21924 (April 13, 2016) (SR-FINRA-2015-029).
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Furthermore, the Exchange proposes to correct a typo in the quoted
text in General 9, Section 24(b)(2). Specifically, the Exchange will
substitute the word ``immediately'' with ``immediate.''
The Exchange proposes also to replace a reference to NASD Rule 2790
with FINRA Rule 5130.\39\ The definition of ``immediate family
member,'' cross-referenced in General 9, Section 24(b)(2), is currently
located under FINRA Rule 5130(i)(5).
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\39\ See Securities Exchange Act Release No. 58421 (August 25,
2008), 73 FR 51032 (August 29, 2008) (SR-FINRA-2008-025).
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General 9, Section 25. Transactions for or by Associated Persons
The Exchange proposes to update the NASD Rule 3050 reference in
this rule and replace it with a reference to FINRA Rule 3210
(``Accounts At Other Broker-Dealers and Financial Institutions'').
FINRA Rule 3210 was adopted to consolidate NASD Rule 3050, Incorporated
NYSE Rules 407 and 407A, and Incorporated NYSE Rule Interpretations
407/01 and 407/02. The rule was designed to streamline the provisions
of the NASD and incorporated NYSE rules and to help facilitate
effective oversight of the specified trading activities of associated
persons of member firms.\40\
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\40\ See supra note 38.
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General 9, Section 26. Influencing or Rewarding Employees of Others
The Exchange proposes to update the NASD Rule 3060 reference in
this rule and replace it with a reference to FINRA Rule 3220
(``Influencing or Rewarding Employees of Others''). FINRA Rule 3220 was
adopted without any material changes to the NASD rule text.\41\
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\41\ See Securities Exchange Act Release No. 58660 (September
26, 2008), 73 FR 57393 (October 2, 2008) (SR-FINRA-2008-027).
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General 9, Section 28. Disclosure to Associated Persons When Signing
Form U4
The Exchange proposes to update the NASD Rule 3080 reference in
this rule and replace it with a reference to FINRA Rule 2263
(``Arbitration Disclosure to Associated Persons Signing or
Acknowledging Form U4''). NASD Rule 3080 was transferred into FINRA
Rule 2263 which was adopted to improve and clarify the disclosure
requirement of Form U4.\42\
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\42\ See Securities Exchange Act Release No. 60348 (July 20,
2009), 74 FR 37077 (July 27, 2009) (SR-FINRA-2009-019).
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General 9, Section 31. Use of Information Obtained in Fiduciary
Capacity
The Exchange proposes to update the NASD Rule 3120 reference in
this rule and replace it with a reference to FINRA Rule 2060 (``Use of
Information Obtained in Fiduciary Capacity''). FINRA Rule 2060 was
adopted without any changes to the NASD rule text.\43\
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\43\ See Securities Exchange Act Release No. 61071 (November 30,
2009), 74 FR 64109 (December 7, 2009) (SR-FINRA-2009-067).
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[[Page 16001]]
General 9, Section 33. Reporting Requirements for Clearing Firms
The Exchange proposes to update the NASD Rule 3150 reference in
this rule and replace it with a reference to FINRA Rule 4540
(``Reporting Requirements for Clearing Firms''). FINRA Rule 4540 was
adopted without any substantive changes to the NASD rule text.\44\
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\44\ See supra note 21.
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General 9, Section 34. Extensions of Time Under Regulation T and SEC
Rule 15c3-3
The Exchange proposes to update the NASD Rule 3160 reference in
this rule and replace it with a reference to FINRA Rule 4230
(``Required Submissions for Requests for Extensions of Time Under
Regulation T and SEA Rule 15c3-3''). FINRA Rule 4230 was adopted
largely based on the text of NASD Rule 3160, with a clarification to
the original rule text regarding the reporting obligations of clearing
members.\45\
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\45\ See Securities Exchange Act Release No. 62482 (July 12,
2010), 75 FR 41562 (July 16, 2010) (SR-FINRA-2010-024).
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General 9, Section 38. Margin Requirements
The Exchange proposes to update the NASD Rule 2520 references in
this rule and replace it with references to FINRA Rule 4210 (``Margin
Requirements''). In 2010, NASD Rules 2520, 2521, 2522, and IM-2522 were
combined and consolidated into a single rule intended to improve the
organization of margin rules and improve their readability.\46\
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\46\ Id.
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General 9, Section 49. Payments Involving Publications That Influence
the Market Price of a Security
The Exchange proposes to update the NASD Rule 2711 reference in
this rule and replace it with a reference to FINRA Rule 2241
(``Research Analysts and Research Reports''). Specifically, the
research report's definition referenced in General 9, Section 49(b)(3)
was relocated to current FINRA Rule 2241(a)(11). That definition was
amended to exclude communications concerning open-end registered
investment companies not listed or traded on an exchange.\47\
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\47\ See Securities Exchange Act Release No. 75471 (July 16,
2015), 80 FR 43482 (July 22, 2015) (SR-FINRA-2014-047).
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Exchange Rule 2830. Investment Company Securities
The Exchange proposes to update the NASD Rule 2830 reference in
this rule and replace it with a reference to FINRA Rule 2341
(``Investment Company Securities''). FINRA Rule 2341 was adopted
without any substantive changes to the NASD rule text.\48\
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\48\ See Securities Exchange Act Release No. 78130 (June 22,
2016), 81 FR 42016 (June 28, 2016) (SR-FINRA-2016-019).
---------------------------------------------------------------------------
Moreover, to be consistent with cross-reference updates in current
FINRA Rule 2341, the Exchange will update the cross-reference to NASD
Rule 2820 with FINRA Rule 2320. Additionally, the Exchange will update
Rule 2830(b)(3) by replacing the NASD Rule 2420 reference with FINRA
Rule 2040 and update the rule text to track the text of FINRA Rule
2040(a). Finally, the Exchange will replace the NASD Rule 2230
reference with FINRA Rule 2232.
Exchange Rule 2843. Account Approval
The Exchange proposes to update the references to NASD Rules
2860(b)(16) and 2843 in this rule and replace them with references to
FINRA Rules 2360(b)(16) (``Opening of Accounts'') and 2352 (``Account
Approval''). FINRA Rule 2360(b)(16) was adopted with minor changes to
its rule text and FINRA Rule 2352 was adopted without any substantive
changes to its rule text.\49\
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\49\ See Securities Exchange Act Release No. 58932 (November 12,
2008), 73 FR 69696 (November 19, 2008) (SR-FINRA-2008-032).
---------------------------------------------------------------------------
Exchange Rule 2844. Suitability
The Exchange proposes to update the reference to NASD Rules
2860(b)(19) and 2844 in this rule and replace them with references to
FINRA Rules 2360(b)(19) (``Suitability'') and 2353 (``Suitability'').
FINRA Rules 2360(b)(19) and 2353 were adopted without any substantive
changes to their respective rule text.\50\
---------------------------------------------------------------------------
\50\ Id.
---------------------------------------------------------------------------
Exchange Rule 2845. Discretionary Accounts
The Exchange proposes to update the reference to NASD Rules
2860(b)(18) and 2845 in this rule and replace them with references to
FINRA Rules 2360(b)(18) (``Discretionary Accounts'') and 2354
(``Discretionary Accounts''). FINRA Rules 2360(b)(18) and 2354 were
adopted without any substantive changes to their respective rule
text.\51\
---------------------------------------------------------------------------
\51\ Id.
---------------------------------------------------------------------------
Moreover, to be consistent with cross-reference updates in current
FINRA Rule 2360(b)(18), the Exchange proposes to update the cross-
reference to NASD Rules 2510 and 3110(c)(4), respectively, with FINRA
Rules 3260 and 4512(c). Relatedly, the Exchange proposes to update the
references to Exchange Rules 2510 and 3110(c)(4), respectively, with a
reference to General 9, Sections 19 and 45.\52\
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\52\ See supra note 9.
---------------------------------------------------------------------------
Exchange Rule 2846. Supervision of Accounts
The Exchange proposes to update the reference to NASD Rules
2860(b)(20) and 2846 in this rule and replace them with references to
FINRA Rules 2360(b)(20) (``Supervision of Accounts'') and 2355
(``Supervision of Accounts''). FINRA Rules 2360(b)(20) and 2355 were
adopted without any substantive changes to their respective rule
text.\53\
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\53\ See supra note 49.
---------------------------------------------------------------------------
Moreover, to be consistent with cross-reference updates in current
FINRA Rule 2360(b)(20), the Exchange proposes to update the cross-
reference to NASD Rules 3010, 3012, and 3013, respectively, with FINRA
Rules 3110, 3120, and 3130. Relatedly, the Exchange proposes to update
the references to Exchange Rules 3010, 3012, and 3013 with respective
references to General 9, Sections 20 and 21.\54\
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\54\ See supra note 9.
---------------------------------------------------------------------------
Exchange Rule 2847. Customer Complaints
The Exchange proposes to update the reference to NASD Rules
2860(b)(17)(A) and 2847 in this rule and replace them with references
to FINRA Rules 2360(b)(17)(A) and 2356. FINRA Rules 2360(b)(17)(A) and
2356 were adopted without any substantive changes to their respective
rule text.\55\
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\55\ See supra note 49.
---------------------------------------------------------------------------
Moreover, to be consistent with cross-reference updates in current
FINRA Rule 2360(b)(17)(A), the Exchange proposes to update the cross-
reference to NASD Rule 3110 with references to FINRA Rules 2268 and the
Rule 4510 Series. Relatedly, the Exchange proposes to update the
references to Exchange Rule 3110 with a reference to General 9, Section
30.\56\ Finally, the Exchange proposes to add text indicating that the
reference to Rule 5340 shall be disregarded as such rule does not apply
to the Exchange, as the Exchange does not pre-time stamp order tickets
in connection with block positioning.
---------------------------------------------------------------------------
\56\ See supra note 9.
---------------------------------------------------------------------------
Exchange Rule 2848. Communications With the Public and Customers
Concerning Index Warrants, Currency Index Warrants, and Currency
Warrants
The Exchange proposes to update the reference to NASD Rule 2848 in
this rule and replace it with a reference to FINRA Rule 2357
(``Communications with the Public and Customers
[[Page 16002]]
Concerning Index Warrants, Currency Index Warrants and Currency
Warrants''). FINRA Rule 2357 was adopted without any substantive
changes to the NASD rule text.\57\
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\57\ See supra note 49.
---------------------------------------------------------------------------
Exchange Rule 2849. Maintenance of Records
The Exchange proposes to update the reference to NASD Rules
2860(b)(17)(B) and 2849 in this rule and replace them with references
to FINRA Rules 2360(b)(17)(B) and 2358. FINRA Rules 2360(b)(17)(B) and
2358 were adopted without any substantive changes to their respective
rule text.\58\
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\58\ See id.
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Exchange Rule 3360. Short-Interest Reporting
In 2008, FINRA Rule 4560 was adopted to include the short interest
reporting requirements of the substantially similar NASD Rule 3360 and
Incorporated NYSE Rules 421(1) and 421.10 with non-substantive changes
to the NASD rule text.\59\ In 2010, FINRA made further amendments to
the rule that were intended to eliminate the definition of ``OTC Equity
Security'' in FINRA Rule 4560 (Short-Interest Reporting) and to clarify
that the rule applied to all equity securities except restricted equity
securities.\60\
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\59\ See Securities Exchange Act Release No. 58461 (September 4,
2008), 73 FR 52710 (September 10, 2008) (SR-FINRA-2008-033).
\60\ See Securities Exchange Act Release No. 61979 (April 23,
2010), 75 FR 23316 (May 3, 2010) (SR-FINRA-2010-003).
---------------------------------------------------------------------------
The Exchange proposes to update Rule 3360(a) by replacing the NASD
Rule 3360 reference with FINRA Rule 4560 (``Short-Interest
Reporting''). The Exchange will not update Rule 3360 to include the
reference to ``Restricted Equity Securities'' found in FINRA Rule 4560
since such securities are not listed or traded in the Exchange;
relatedly, the Exchange will omit the reference to FINRA Rule 6420
since a cross-reference to the definition of Restricted Equity
Securities is not required. Further, the Exchange will add the word
``all'' before the word ``securities'' but, unlike the FINRA rule, will
not insert the word ``equities'' because the Exchange also lists
options securities. Finally, the Exchange will remove a sentence
concerning the reporting obligations to reflect changes also made in
the FINRA rule.\61\
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\61\ See Securities Exchange Act Release No. 66872 (April 27,
2012), 77 FR 26340 (May 3, 2012) (SR-FINRA-2012-001).
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The Exchange also proposes to amend current Rule 3360(b) and (c)
and adopt the text of current FINRA Rule 4560(b) and (c).
Exchange Rule 4200. Definitions
The Exchange proposes to update the NASD Rule 2710(b)(11) reference
in this rule and replace it with a reference to FINRA Rule 5190
(``Notification Requirements for Offering Participants''). In 2008,
NASD Rules 2710(b)(10) and (11) were relocated into FINRA Rule 5190 to
consolidate and streamline all Regulation M-related notice
requirements.\62\
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\62\ See Securities Exchange Act Release No. 58514 (September
11, 2008), 73 FR 54190 (September 18, 2008) (SR-FINRA-2008-039).
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The Exchange also proposes to replace in Rule 4200(a)(3) and (b)
the cross-reference to Exchange Rule 4623 (``Alternative Trading
Systems'') with Exchange Rule 4624. Consistent with FINRA Rule 5190(e),
an Exchange member's notification obligation, as described in Rule
4200, is detailed under Exchange Rule 4624 (``Penalty Bids and
Syndicate Covering Transactions'').
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\63\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\64\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest by bringing greater transparency to its rules
by updating the references to the FINRA rules previously described. The
Exchange's proposal is consistent with the Act and will protect
investors and the public interest by harmonizing its rules and
clarifying outdated references so that Exchange members and the general
public can readily locate FINRA rules that are incorporated by
reference into the Rulebook.
---------------------------------------------------------------------------
\63\ 15 U.S.C. 78f(b).
\64\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The amendment to the books and records rules, reference and cross-
reference updates, re-lettering, renumbering, deleting unnecessary or
duplicative text, consolidating certain Exchange rules, and other minor
technical changes will update the Exchange's rules and bring greater
transparency to the Exchange's Rulebook. The Exchange believes its
proposal will benefit investors and the general public by increasing
the transparency of its Rulebook.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed amendments do not impose an undue burden on competition
because the amendments to update the references and cross-references in
its Rulebook are intended to bring greater clarity to the Exchange's
rules. The amendment to the books and records rules, reference and
cross-reference updates, re-lettering, renumbering, deleting
unnecessary or duplicative text, consolidating certain Exchange rules,
and other minor technical changes will update the Exchange's rules
bring greater transparency to the Exchange's Rulebook.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \65\ and Rule 19b-
4(f)(6) thereunder.\66\
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\65\ 15 U.S.C. 78s(b)(3)(A).
\66\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act.
[[Page 16003]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2021-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2021-006. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2021-006 and should be submitted on
or before April 15, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\67\
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\67\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-06125 Filed 3-24-21; 8:45 am]
BILLING CODE 8011-01-P
